Controversial debt deal<\/p>\n
The agreement the government and a number of conglomerates
\nmade in late 1998 to recoup more than Rp 138 trillion (US$13
\nbillion) in emergency loans given by Bank Indonesia to several
\nmajor banks has been as controversial as the extension of
\nliquidity support itself.<\/p>\n
The deals, popularly known as the Master Settlement and
\nAcquisition Agreements (MSAA) and Master of Refinancing
\nAgreements (MRA), were hurriedly negotiated amid the peak of the
\neconomic crisis in mid-1998 in a desperate bid to recover the
\nmulti-billion dollar loans for the cash-starved government.<\/p>\n
Greatly concerned that longer delays would allow the huge
\ndebtors to strip their assets and transfer their money overseas,
\nthen president B.J. Habibie insisted that the former owners of
\nthe banks that received liquidity credit repay their debts in
\ncash within one year. Foreign consultants were then hired to
\nvalue the assets (companies) to be ceded by the debtors to settle
\ntheir obligations.<\/p>\n
However, the International Monetary Fund (IMF) balked at
\nHabibie's request, arguing that a quick sale of more than 150
\ncompanies to be surrendered by the conglomerates under the then
\ndepressed economic situation would not only result in a fire sale
\nat very cheap prices but would also cause disruptions in the
\nmanagement of the companies with damaging impacts on the economy.<\/p>\n
Most other independent analysts also shared the IMF view,
\nespecially because Habibie was then surrounded by close advisers
\nwith strong nationalist sentiments, who demanded that the debt
\nsettlement be used as a mechanism to redistribute economic assets
\nfrom ethnic-Chinese conglomerates to cooperatives and other
\nindigenous business people.<\/p>\n
Senior economist Frans Seda, who was then an adviser to
\nHabibie, was against the massive dumping of assets on the market,
\nsaying that the government might be able to recoup only a tiny
\nfraction of the emergency loans and that such a measure might
\nalso give the impression to the international community that the
\ngovernment nationalized assets from investors.<\/p>\n
The government finally agreed in November 1998 to conclude the
\nfour-year MSAAs and MRAs with the big debtors, including Soedono
\nSalim of Bank Central Asia, Mohammad Bob Hasan of Bank Umum
\nNasional, Sjamsul Nursalim of Bank Dagang Nasional Indonesia,
\nUsman Admadjaja of Bank Danamon and Sudwikatmono of Bank Surya.<\/p>\n
Under the agreements, the debtors settled their debts by
\nceding more than 150 companies to the Indonesian Bank
\nRestructuring Agency (IBRA), which were then valued by
\nconsultants and auditors as equivalent to their debts. The
\ndebtors were in turn absolved of any further obligations and of
\npotential civil or criminal proceedings regarding the violations
\nof banking laws, notably the breaches of the maximum legal
\nlending limits to connected parties.<\/p>\n
Problems and controversy later exploded as the value of the
\nceded assets turned out to be much smaller than their original
\nvaluation, and quite a portion of the emergency loans pumped by
\nthe central bank during the height of the banking crisis in early
\n1998 had been misused for currency speculation and paying
\nsubsidiaries. IBRA has estimated that the highest recovery rate
\nis likely to be a mere 30 percent, meaning that 70 percent of the
\nRp 138 trillion loans could be lost. The Financial Sector Policy
\nCommittee of senior economic ministers set off another bomb early
\nthis year by disclosing that the government would agree to extend
\nthe agreements to 10 years for cooperative debtors.<\/p>\n
Certainly, not all the debtors can automatically be held
\nentirely responsible for the fiasco. They had ceded assets whose
\nvalue was assessed by independent auditors hired by the
\ngovernment. The auditors or consultants cannot either be blamed
\nwholly for the worsening of the assets. If the value of the
\nassets are now much lower than the original estimate then that
\nwas largely caused by the government's failure to improve the
\npolitical and economic situation and legal certainty. How could
\nthe asset value remain stable, let alone increase, when the
\neconomic outlook remains so bleak and their management and
\nsupervision under IBRA has been so poor.<\/p>\n
The government is faced with a delicate dilemma. It cannot
\nsimply declare the MSAAs and MRAs void, as both parties are
\nlegally bound by the agreements. But simply extending the
\nagreements to 10 years, as the government has planned to do, is
\ncompletely unjust to the people who now bear the burdens of the
\nloans. Superficial rescheduling will accomplish nothing.<\/p>\n
The government should first classify the debtors into those
\nwho entered the 1998 agreements in good faith and the ones in bad
\nfaith, who ceded assets with legal flaws. Then they should
\nrenegotiate the deals with good debtors under new agreements, not
\nonly rescheduling, but also restructuring, their debts. This
\nrequires the reevaluation of ceded assets and the restructuring
\nof their management and operations. But the debtors of bad faith,
\nwho were proven to have cheated the government with legally
\nflawed assets, should be brought to justice, immediately.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/controversial-debt-deal-1447893297",
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